Where is Unemployment Headed?

Townhall.com ^ | March 24, 2012 | Mike Shedlock

[Kaslin]

I have a pretty cool interactive map below that will let you graph the unemployment rates based on parameters that you can choose.

First let's take a look at the current unemployment rate and a discussion of the parameters that define it.

The BLS says the unemployment rate is 8.3%. There is much recent debate over that number, and many do not believe it. Regardless, this is where we stand as of Friday March 9, as reported in my post Nonfarm Payroll +227,000 ; Unemployment Rate Steady 8.3%; BLS vs. Gallup.

Quick Notes About the Unemployment Rate

• In the last year, the civilian population rose by 3,584,000. Yet the labor force only rose by 1,569,000. Those not in the labor force rose by 2,014,000.  
• In February, the Civilian Labor Force rose by 476,000.  
• In February, those "Not in Labor Force" decreased by 310,000. If you are not in the labor force, you are not counted as unemployed. 
• Participation Rate rose .2 to 63.9% 
• Were it not for people dropping out of the labor force, the unemployment rate would be well over 11%.

Over the past several years people have dropped out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low. Some of this was due to major revisions last month on account of the 2010 census finally factored in. However, most of it is simply economic weakness.

The key is not how we got here, but rather where the unemployment rate is headed next.

Unemployment Rate Factors

Whether the unemployment rate rises or drops is a function of two factors

1. How many jobs are created or lost
2. How fast the labor force is rising or contracting

Bernanke estimates it takes about 125,000 jobs a month to keep up with population growth. Demographically speaking, I agree with that number but it should decline over the next few years as boomers retire.

The math is straight forward, all things being equal (they aren't) the labor force should rise by about 1.5 million jobs per year.

Household Survey Data



click on chart for sharper image
 
Recall that the unemployment rate is based not off the payroll survey, but the household telephone survey show above. This past month the BLS reported a "seasonally-adjusted" gain in employment of 428,000 workers.

The unemployment was steady because the BLS reported a "seasonally-adjusted" gain in the civilian labor force of 476,000.

Both unusually warm weather and questionable seasonal adjustments are at play.

The following numbers are from the "payroll survey" not the "household survey" but they may help give you a perspective on jobs.

Monthly Job Growth 1999-2011



Chart courtesy of BLS. Annotations in red by me, numbers are in thousands.

Key Points

• At the height of the internet bubble with Greenspan stepping on the gas out of irrational fear of Y2K problems, the economy managed to gain 264,000 jobs a month.
• At the height of the housing bubble in 2005, the economy added 208,000 jobs a month.
• At the height of the commercial real estate bubble with massive store expansion, the economy added 172,000 jobs per month.

Neither the housing boom, nor the commercial real estate boom is coming back. Nor is there going to be another internet revolution.

Use those thoughts and whatever else you wish to decide how many jobs the economy will realistically add per month for the next several years. You can factor in a recession or not. It's up to you.

Next determine how many jobs it will take per month to keep up with demographics. Bernanke thinks 125,000 but you also need to decide how many of those 2 million people who gave up looking for work decide to start looking again.

With that backdrop ....

You Make The Call

Powered by Tableau

Thanks to Ross Perez at Tableau Software for the above interactive map.

I had this idea from the first moment I saw Tableau Software. A recently introduced feature, the ability to map user generated input, is what made the graph possible.

Assuming 150,000 jobs a month and a labor force rise of 125,000 jobs a month, the unemployment rate would not cross below 8% until April of 2013.



Note the "Hover Over" effect. Put your cursor at any point on the line to see point-in-time details.

If disgruntled workers come back into the work force faster than job growth, regardless of what that job growth is, unemployment will rise. In general, that would be a good thing economically were it to happen, but it could mean a difficult time for those expecting the unemployment rate to drop as it has over the last couple years.

Regardless, I see no reason to deviate from my "Structurally High Unemployment For a Decade" call made years ago and reiterated in January in Fundamental and Mathematical Case for Structurally High Unemployment for a Decade; Shrinking Job Opportunities and the Jobs Gap; The Real Employment Situation

[steve8714]

Your house.

[COBOL2Java]

Well, at least the posters can be put to good use...

[null and void]

The "official" unemployment rate will be 5% in the first week of November, no matter how many are out of work.

[no dems]

If you are not in the labor force, you are not counted as unemployed.
__________________________________________________________________________________
Thanks for posting this Kas. I realized something from this Post: Think of the millions of college grads who cannot find work. They cannot draw unemployment because they haven’t worked for 4 or more years and have not paid into the system. They are not counted. But, they are pissed and most say they will NOT vote for Obozo this time around. (Oh.... poetic justice; how sweet it is.)

[The Sons of Liberty]

Where is Unemployment Headed?

Well, the "official" 0bama propaganda figures will show it declining dramatically before the election, and the talking heads will then declare that the economy is growing and we are coming out of recession.

The REAL story will be that the figures will be thoroughly "massaged" by the 0bama regime and what ever groups that need to be excluded will be removed and not counted, to make the lying figures work out. If you have been out of work for a while, you will magically no longer be unemployed!

[RetiredArmy]

I was watching a guy on a video the other night and he said that 8-9% unemployment is a big fat government lie. He said if REAL unemployed people were truly counted, it would be closer to 21-22% and possibly as high as 25%!! He said the gov’mint uses fuzzy math to bring the numbers down to dumb people down to how bad it really is out there.

[shelterguy]

According to the husseon propaganda ministry if a guy used to be a mechanical engineer making 120 thousand a year and is now working two days a week flipping burgers he is considered employed and that’s all that matters.

[peeps36]

It is frustrating to go to the gas station or the grocery store and see how much less you get for your money. It wouldn’t be so bad if the future looked brighter but it doesn’t. The rising cost of food and energy will eat up more and more of our disposable income. Isn’t this economic recovery great?

[DustyMoment]

What makes all of this even more interesting is that the disingenuous, biased media (DBM) is only just beginning to acknowledge an associated part of the problem. Many employers are now announcing that they will NOT hire anyone who has been unemployed for over 6 months!!

What makes this rather fascinating to me is this: The people who haven’t HAD any jobs to offer for at LEAST the past year, won’t hire you if you didn’t accept one of the jobs they haven’t had to offer!!

Only a liberal could come up with something this patently stupid!!

[slowhandluke]

You can follow the numbers at shadowstats.

[RipSawyer]

Yes, the rising prices are in effect making unemployment rise even without anyone losing their job. If ten people are working and prices rise so that all ten can only buy what nine used to buy that is the same as ten percent unemployment except that it is spread equally so each person is effectively only ninety percent employed compared to where he was before. Think about it, without inflation one could lose his job and the other nine could give him ten percent of their income and the result would be the same as with ten percent inflation except that one person would be able to stay home. Most people never think of it that way and it will certainly never be reported that way by any news service from Fox to MSNBC.

Doug Casey has said that he believes future historians will say that American living standards actually peaked in the early sixties. He may be right. Of course many will rush to point out all the things that we have now that were not available then but they ignore the things that were available then that are unavailable or unaffordable now. Casey made his statement based on the fact that most working people could support a family on one income then. It may not have included personal computers, cell phones etc. but they could live on one income. How many can do that now? In 1963 anyone making twice the minimum wage could support a family and buy that family a house to live in, at least in my neck of the woods. Twice the minimum now would be fourteen dollars and seventy cents an hour, who wants to try to buy a house and support a family on that WITHOUT ASSISTANCE now even in the lowest cost of living area of the country? This house of cards is about ready to crumble.

[steve8714]

I own a temp service. I can tell you that men are desparate for work. There is currently no recovery in the jobs market.

[griswold3]

Consider my input costs are rising and my profit margin heading south, do you think I’m in a position to hire?

[GeronL]

I read the title and the Jefferson’s theme song came to mind.

...

“Movin’ on up.... to the sky-y”

[Stosh]

Interesting.

If one uses the Shadowstats data, the current “misery index” under Obama is about 28%.

From a quick check on the internet, it looks like the worst “misery index” reading we got under Carter was about 22%.

Never underestimate the value of a compliant press.

[Toddsterpatriot]

Think of the millions of college grads who cannot find work. They cannot draw unemployment because they haven’t worked for 4 or more years and have not paid into the system. They are not counted.

If they're looking for work, they're counted, whether they worked in the last 4 years or not.

[Elsie]

Assuming 150,000 jobs a month ....

Yup; that's what this entire article is.

[Elsie]

“Churning” is illegal in the financial world; but VALUED in the labor market.

[MaxMax]

Anyone collecting a welfare check is considered employed because they are being paid.